Bad Policy Choices, Not Bad Weather, Restraining Job Growth

By Adam Hersh
Posted on March 7, 2014, 11:26 am

Employment growth rebounded in February, according to today’s employment situation report from the Bureau of Labor Statistics, proving economists wrong—people can actually work in the cold and snow. The U.S. economy added 175,000 new jobs in February, and revised figures show job growth averaging just 129,000 jobs per month over the past three months.

Job growth is trending in the right direction, although still short of what is needed to return the U.S. labor market to full employment or drive real wage gains in the near future. The unemployment rate overall crept up one notch to 6.7 percent as more people returned to the labor force, but the number of people employed relative to the overall population remained unchanged.

Unemployment continued disproportionately affecting historically disadvantaged groups. The unemployment rate for African Americans was basically unchanged at 12 percent, but unemployment for African American men shot up nearly 1 percentage point to 12.9 percent, the same level as one year ago. Unemployment for Latinos fell 0.3 percentage points to 8.1 percent in February. For young people ages 20 to 24, unemployment remained unchanged at 11.9 percent.

Today’s report shows that a soft underlying trend, rather than the unusually harsh winter weather, is driving recent labor market performance. Parts of the economy that were likely most affected by weather, such as construction and temporary help, actually increased employment over the past three months faster than in the summer of 2013. Parts of the economy less affected by weather, such as the financial sector, actually expanded employment at a slower pace in the past three months than last summer. Bad weather also did not significantly affect those already employed: Average weekly work hours were basically unchanged in the sectors of the economy that produce goods and services.

Overall employment was led by gains in the administrative and support services, education and health services, food services industries, and state and local public services, which accounted for two-thirds of February’s job gains in today’s report. Employment in the manufacturing sector continued a slow-but-steady resurgence, adding 6,000 new jobs or 61,000 more jobs than one year ago.

Rather than the unusually harsh winter weather, it is the unusually harsh conservatives in Congress who are keeping job growth from its full potential by cutting aggregate demand at a time when we have a $700 billion demand shortfall in the economy, according to Congressional Budget Office estimates. Most recently, conservatives blocked a bipartisan effort to reauthorize emergency unemployment compensation that expired in late December 2013 for workers unemployed and searching for jobs longer than 26 weeks. Fully 37 percent of the 10.5 million unemployed workers fall into this long-term unemployed category, or 203,000 more individuals than in January, according to today’s employment report.

As of today, more than 2 million of these long-term job seekers and their families have been cut off from benefits, and another 72,000 people will join their ranks each week that Congress fails to act. In other words, 272,000 more long-term unemployed people were cut from benefits than the total number of new jobs created in the U.S. economy over the past two months. By acting to extend benefits, Congress can boost job creation and expand economic growth by 0.2 percent, according to Congressional Budget Office estimates, injecting more demand into the economy while providing much needed assistance to those families struggling with long-term unemployment.

To be sure, unemployment insurance is not a permanent fix to the too-slow U.S. jobs recovery. But with 3.2 unemployed and disguised unemployed workers for every job opening in the economy—according to separate Labor Department data—failure to reauthorize emergency unemployment compensation just invites further destabilizing for families and the businesses that rely on their spending.

Adam S. Hersh is a Senior Economist at the Center for American Progress.